Series 7 Exam Question 63: Answer and Explanation

Question: 63

A mutual fund has a net asset value of $9.40 and a sales charge of 6 percent. What is the public offering price?

• A. $9.34
• B. $9.46
• C. $10.00
• D. $10.27

Correct Answer: C

Explanation:

C. One of the things about a mutual fund is that the public offering price (POP) includes the sales charge, so it doesn't work if you just take the sales charge percent of the net asset value (NAV) and add it to the NAV. Use the following formula to get the correct answer:

$\text{POP}=\frac{\text{NAV}}{100\%-\text{sales}\text{charge}\text{\%}}=\frac{\$9.40}{100\%-6\%}=\frac{\$9.40}{94\%}=\$10.00\text{per}\text{share}$